All You Need Are Roots and Wings

Net worth: Get clear about your long game.

Amanda Steinberg Worth ItExcerpt #3 from Worth It: Your Life, Your Money, Your Terms

My mother told my teenage self that to navigate life successfully, all I needed were roots and wings: foundational values and principles, and the confidence to take calculated risks so I could grow. I’ve thought about that metaphor a lot over the years, and I’ve applied it to my life as a mother, as an entrepreneur, as a leader, and more. I’ve also applied it to managing my money and funding my life on my own terms, and I want to urge you to do it, too.

Here’s how I use the metaphor of “roots” in terms of your financial well-being. Roots are your foundational, principal assets. They are your long-term investments. They’re your retirement accounts, real estate, stocks and bonds, maybe a successful business you own—in some cases, art, jewelry, and other valuables. Roots grow slowly over time. They don’t convert easily or quickly into cash for easy spending. They require regular, periodic attention, like watering, fertilizing, and weeding. Strong, long-term assets are key to your net worth because they are hard to uproot. And because they accrue value and compound earnings over time, they allow you to make money on your money. When handled wisely, they provide security, like roots holding down a tree.

Wings represent your income and access to cash. How high or where you fly depends on how much you’ve got in your money market or savings account, as well as how you spend your money and how you use credit. You can measure your wingspan by the amount and regularity of your income stream, as well as the financial habits that you practice and that affect your life, every day. When used wisely, your wings will help you bring back regular earnings and any lucky windfalls to nest above your roots, funding and protecting them. But wings will also give you the urge and confidence to take flight, with the freedom to soar and enjoy your life, in whatever direction you choose.

So, how do you assess your financial well-being in terms of the strength of your roots on the one hand, and your wings on the other? Ask yourself a few questions. Can short-term challenges or losses come and go without disrupting your basic stability or ultimate vision for how you want to live your life? If you’ve got enough cash on hand to cover emergencies, you can glide through financial surprises when they blow into your life because you’ve got strong wings.

When you picture yourself five, ten, thirty years down the road, do you feel secure because you know your assets are anchored and growing steadily? Then you know your roots are strong. But how do you measure how well your roots and wings are working together successfully? By checking in regularly with your net worth number.

Net worth: Get clear about your long game.

If you’re like many Americans, you may believe that buying a home is an investment. Yet as we learned in 2008, a home is only an investment when the value of the house goes up during the time you own it. In terms of net worth, think about it this way: We usually say that you “own a house,” but unless you paid cash, you really own a mortgage. When you reframe the transaction that way, you get that “buying a house” can have a negative effect on your net worth, at least in the beginning. You don’t own the house—the bank does. And you owe the bank.

Net worth matters because it’s what you own in order to generate income when your career ends. Whether that’s due to a temporary job loss or retirement, everyone knows that your debt payments don’t stop just because your income does. If you have a positive net worth, you can create income. You have choices. If you have a negative net worth, you are penniless, no matter how much money you made at your peak. You have very few choices. Net worth is the only real measure of financial security.

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